1. How were the French able to dominate the worldwide wine trade for centuries? What sources of competitive advantage did they develop to support their exports?
The French wine production essentially dates back to the time when it was part of the pioneering niche market for high quality premium wine. The factor conditions such as land and climate were pertinent attributes of the France, compared to other European countries. Cross border shipping costs surged in the early 19th century. However, France was able to amalgamate the relevant industries that supported wine production, within their borders. Therefore, France was able to raise the level of its competitive advantage throughout the various sources, absent any relative impact from other countries.
Eventually, the wine industry proliferated and became the second largest export segment for France. This was combined with an extravagant culture of rich food, whilst making the customers more demanding, with respect to a certain quality of wine produced. In the aftermath of such demand shifts, the French government created the classification system, which raised the barriers to entry so that foreign competition can be limited.
This classification system also aided the consumers in making easy decisions through the complexity of a fragmented market. It was essentially a depiction of standardization of quality measures to maintain industry standards of French wine worldwide.
Much was relied on the vintner with respect to other operational capacities such as marketing and research. Due to a fragmented market, most small scale farmers relied on the wine maker for most market activities.
2. Given the longstanding dominance of Old World wine producers, how were the New World producers, such as the Australians, able to expand their market share so rapidly in the 1990s?
3. What changes in the global industry structure and competitive dynamics led the France and other traditional producers to lose market share to challengers from Australia, US, and other New World countries?
4. What should be done for France to restore its position?